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A valediction to Mariano Rajoy

Europa United contributor, Sean McLaughlin asses the career of former Spanish Prime Minister, Mariano Rajoy and argues that his resignation was abrupt and that maybe Spain will be the poorer for it.

Mariano Rajoy left Spain’s Palacio de las Cortes on 31 May after over seven years as the country’s Prime Minister. It is regretful that the man who steered Spain out of its worst situation in 30 years was ousted with a no confidence vote. Such is politics.

He was ousted following a court’s verdict that his party had benefited from kickbacks through slush funds, years ago. Rajoy himself was not accused of misconduct. However, the court stated that claims he knew nothing about the fund were not credible.

The Rajoy premiership was born in crises, beyond dealing with the economic crisis. Numerous corruption scandals emerged, two new parties burst on to Spain’s political scene and the region of Catalunya declared independence unilaterally.

Fast mover

Born in 1955, the son of a jurist, he rose through the ranks of Spain’s People’s Party (PP). He held various positions in the Anzar governments of 2006-2011. He won Spain’s 2011 election on the promise of righting the economic wrongs of Spain’s boom years from 2004 onwards. Those years were, in truth, classical boom years. Years of unsustainable economic growth led to a dire economic crash. Unemployment jumped from 8% in 2007, to 26% in 2013, public debt ballooned, economic growth stagnated. Europe’s fourth largest economy was well and truly on its knees.

A young Mariano Rajoy

Telling would be his 2011 victory speech. Rajoy stated that “For me, there will be no enemies but unemployment, the deficit, excessive debt, economic stagnation and anything else that keeps our country in these critical circumstances. … It is no secret to anyone that we are going to rule in the most delicate circumstances Spain has faced in 30 years… There won’t be any miracles. We never promised any. But as we have said before, when things are done properly, the results come in…”

Rajoy then directed Spain through the most audacious years of structural reforms and put the country on a path to solid economic growth. It would be accurate to see what Spain then witnessed as a “structural recovery”. Many economists look to this as evidence that the Mediterranean countries are not pathologically wired to economic deprivation, as many seem to believe. Among these reforms were reducing severance payments for employers (from 45 to 33), making firing easier, reducing regulations involved in starting businesses, tackling Spain’s deficit and cleaning up its financial sector.

Nonetheless, structural reforms took years to bear fruit. 2012 saw -2.9% growth, followed by 1.7% in 2013. The next three years saw rises of 1.4%, 3.4%, 3.3%, then 3.1% in 2017, according to the Bank of Spain. The country surpassed its pre-crisis GDP peak in 2017. Unemployment had fallen to a further 17% in 2017.

The Rajoy government had an unwavering focus on restoring sustainable economic growth, as opposed to redistribution. Much of the growth was largely export led and coincided with a weak Euro, making Spain’s exports more competitive.
Pivotal to restoring growth was the EU assisted EUR 100bn rescue package which bailed out bust Spanish savings banks in 2013. This recapitalised the Spanish banking sector. Many of Spain’s smaller, rogue banks were consolidated and toxic assets put into “bad banks”.

Further to this, tax increases and spending cuts saw the budget deficit fall from 10.4% of GDP in 2012 to 3.1% in 2017.

Memories of a speculated Spanish euro-exit look increasingly distant. All of the above point to a country creeping towards economic fortitude, the foundations of which have been laid by the Rajoy administration.

Perhaps the most revealing figures are those which Eurozone countries’ real GDP per head to its 2007 level. Compiled by Thomson Reuters and FT Research, those figures see Italy’s GDP come in at 9% less than the 2007 level, with 11% less for Greece. Meanwhile, Spain, Portugal and France come in at 4% higher. In other words, Spain (along with France and Portugal) is 4% richer as a country now than it was pre-crisis.

Rajoy appeared to be capable of building a team which could explain what he believed the country needed. A civil servant once remarked that instead of Spain leaving the Euro, the reforms undertaken by the government equated to “devaluing the peseta without leaving the euro”. The People’s Party lost its majority in the elections of late 2015. With much patience, Rajoy would then form a minority government in November 2016.
Of course, Rajoy had major flaws. He was not a charismatic figure and could have tackled more of Spain’s problems, and gone on longer, with better articulation and flare.

He was never short of odd quotes, such as “exporting is good, because you sell what you produce”. At times he confused countries’ flags and rejected simple questions at conferences.

That Spaniards have not turned to populism is also down to happenstance. For example, Spain being a collection of nations under one flag has meant that any populist movement is largely unappealing to voters in Catalonia, the Basque country and other regions.

That Catalan issue

He was also a very stubborn leader. His perceived arrogant handling of the Catalan affair in late 2017 may lead to the issue rearising in a more aggressive manner should Catalans feel belittled. Another, perhaps more accurate interpretation of his handling of that affair is that he took the bull by the horns and avoided a messy, unnecessary referendum. He declared the region’s unilateral declaration of independence illegal and dissolved the regional parliament. In the days and months that followed, across the country, crowds numbering 100,000s marched in scenes never seen before favouring Spanish unity.

The conflict of Spanish unity versus Catatonian independence

To many, he made the Catalans look selfish and reckless, which then gave rise to increased Spanish national pride. These events may have settled the Catalan question, with many now realising that Catalan independence is a pipe dream.
In short, I believe Mariano Rajoy to be one of Europe’s most underrated politicians of modern times. Through multiple crises, he remained level-headed, determined and extremely patient. Beyond economic growth restoration, he leaves behind a cleaner, better governed Spain. This is an irony of his removal. The corruption case, (along with many others), exposed wrongdoings, punished perpetrators and will make such cases less likely to reoccur. Rajoy, as a democrat, is aware that he is also not immune himself from impeachment, even if the scandal did not involve him directly.

A positive end

Media coverage has recently focused on his remarks made in his last few minutes as being Prime Minister, “It is an honour to have left a better Spain than that which I inherited.” That was met by resounding applause in the chamber. True, could anyone reasonably argue that Spain is in a worse state now than the quasi-basket case of 2012?

Not many have focused on his words which followed this remark, “I hope my replacement will be able to say the same in his day. I wish that for the wellbeing of Spain.”

There was a certain dark undertone in him saying this. His removal raises a question as to why Spain’s years of growth and stability need to be abruptly ended. Spain’s new administration is likely to be weak and fragmented, 84 seats in a 350 seat-parliament. Little time may pass before many may come to appreciate, in retrospect only, the stability and growth which the Rajoy years brought.

It is written in this article M. Rajoy was not involved in the corruption case which led to his fall. Yet his name was clearly in the Barcenas papers and it is just not credible he didn’t know about it as the party’s leader.
As for the economic recovery of Spain during his tenure it is highly debatable how much is of his due, just like how much his predecessor Zapatero was responsible for the crisis which hit Spain’s economy.
One can argue both led a not so different laissez-faire policy and the crisis was caused by outside factors and was solved mainly by exterior factors too.
He leaves Spain with a conflict in Catalonia which will take generations to solve if it ever does. His poor handling of the situation only made the situation worse and his party has been the most formidable machine to create pro independence Catalans.
Personally my biggest reproach to his government is he did all he could to undermine Spain’s solar energy sector with his infamous “Sun Tax” to suspiciously favour some private interests. Spain was one of Europe’s leaders in renewable energy when he started his first mandate. Now it’s below average.